Rim Semiconductor Company (fka RSMI)

[WTMHouston]

I have done some more (but not complete) looking at NVEI.

You asked me:

"How much DD did you do before jumping all over NV?"

and then said:

"3D and movies was their goal before technology came along. During that time a financing deal was made for the up coming movie. THIS WAS MADE BEFORE THE TECH!!!"

Actually, the movie financing deal (April 2000) was AFTER the merger (completed in February 2000) that brought the tech. Thus, I cannot resist asking, how much DD you did before jumping on me? Just in case, that question is rhetorical and does not seek or require an answer.

That said, I have also looked at the JV agreement for the movie and it does appear to define net profit in a more traditional manner, rather than in typically evasive Hollywood fashion. Thus, assuming the movie generates sufficient revenue, discussed below, there appears to at least be a possibility of potential profit, at least in the sense that the definition of profit does not wholly exclude it.

It is now within 5 months of the "end of summer 2002" and I wonder whether there is a distribution agreement in place for the film? This really is a question and not an accusation that there is not.

Finally, having read the convertible agreements more closely, I will be shocked if they have not all been converted. The conversion privilege allows the holder to convert not only the principal, but also the 50% "interest" into stock at $0.40 a share. As I recall, and I would have to look it up again to be certain, there is about $1.9 million in convertible financing so far. The additional 50% raises this to $2.85 million, at $0.40 a share = 7.125 million shares.

Lets assume that I loaned NVEI $125K under these terms. I have a convertible option to get $187,500 of NVEI stock at $0.40 a share. Thus, by accepting 468,750 shares, NVEI no longer owes me any money. At the recent $1.00 price, my initial investment of $125,000 can be liquidated for $468,750. Under the note, the most I could ever be paid in cash is $187,500, but if I exercise I can now get more than $450K. It is a no brainer. Frankly, it is a no brainer for an immediate 50% return at ANY price at or above $0.40. Since the note provides that I get NO money (principal or "interest") unless NVEI collects money from the movie, I have NO assurance that the note will ever be paid. I would be taking the production risk. However, since I can immediately and at any time convert the note into 1.5 times as many shares of stock, the ONLY prudent financial move is to convert. It makes NO sense to wait to get paid back in cash.

Thus, before stockholders of NVEI get even, NVEI must get 150% of whatever NVEI ultimately invested by way of the convertibles. If they get the full $2.25 million for such notes, they will need $3.375 million in revenue to NVEI before the owners of NVEI are even. Of course, to get to this $3.375 million, and assuming that the JV never has any expenses above the $2.25 million, which is unlikely, the JV (not the movie) must gross at least $4.50 million. The movie's gross will have to be MUCH greater than $4.5 million for this to happen.

And before anyone tells me that this "could" gross $20 or $30 or $100 million, save your breath: there is NO objective basis that you are aware of (nor that I have been able to find in any public information of NVEI) for making such a prediction. I doubt that there is any such public prediction by anyone from NVEI. Merely because some other movie grossed some amount means NOTHING about what this one "might" do.

One final question, has anyone ever asked how much money would flow through to NVEI if this movie "grossed" $20 million? Has anyone ever asked what this "feature length" film has to "gross" before NVEI stockholders get even? When you (used generically) have an objective basis to answer those questions, then you can tell me that a $20 million gross has any meaning or is sufficient for NVEI to make money.

There is nothing wrong with speculative investments -- so long as those speculating understand all of and the real risks and just do not assume based on the way things appear to be because of how they are worded.

All for now. I'll discuss tech and other issue(s) next time.

Troy